In 1979, the CPI rose 13.5%, the highest inflation rate recorded in the twentieth century in the U.S. Public opinion polls in 1979 consistently showed that most people regarded inflation as the leading problem facing the U.S. How did the Fed respond to this situation?

Question

Quizplus · Accepted Answer

The Fed responded to the high inflation rate by pursuing contractionary policies with the primary goal of lowering inflation. This included raising interest rates and reducing the money supply to slow down spending and reduce price pressures. The switch to a fixed money growth rate rule did not occur until the early 1980s, after the Fed had already taken significant steps to combat inflation.

In 1979, the CPI Rose 13